This assignment accompanies the excel worksheet Comparative Advantage.xls.
Be sure to follow the steps in the assignment and to make sure you open a
specific worksheet before you answer the questions on it.

Sheet Title: A Nonlinear PPC. This
sheet presents a concave production possibilities curve (PPC). Maximum X and Y
are equal to 50 and 100 units respectively.

1.

Define the opportunity cost of X.

2.

Click on the "View Table" button. Why are the numbers under
the column ChY/ChX different from the numbers under the column
titled Opp Cost?

3.

What is the opportunity cost of Y (in terms of X) for the following
points on the PPC? The opportunity cost will be measured in discrete
units (e. g., as Y changes from 19 to 36, from 36 to 51, and so forth.

X

5

10

15

20

25

30

35

40

45

Y

99

96

91

84

75

64

51

36

19

Opp Cost of Y

4.

Choose a different value for Maximum X. New maximum X =______.
How does the PPC change? How does the opportunity cost of X for a given
value of X change? Why?

5.

Choose a different value for Maximum Y. (Keep the new maximum X
from Question 4.) New maximum Y =______.
How does the PPC change (compared to your answer in Question 4)? How
does the opportunity cost of X for a given value of X change? Why?

Sheet Title: 2 PPCs. This
sheet shows how a change in the economy's technology or resource endowment
causes the PPC to shift. Keep the same values for Max X and Max Y that you
used in questions 4 and 5 and choose two new values.

New Max X = ____________ and new Max Y = ____________.

6.

What is the opportunity cost of Y (measured along PPC_1 and PPC_2) for
the X points given below? (Fill in the blanks.)

Sheet Title: Linear PPC. This
sheet presents a linear production possibility curve for a country with maximum
X and maximum Y equal to 60 and 150 units respectively.

7.

Choose a different value for Maximum X. Maximum X =______.

How does the PPC change? How does the opportunity cost of X change?
Why?

How does the opportunity cost of Y change? Why?

8.

Choose a different value for Maximum Y. (Keep the new maximum X
from Question 7). Maximum Y =______.How does the PPC change
(compared to your answer in Question 7)? How does the opportunity
cost of X change? Why? How does the opportunity cost of Y change? Why?

Sheet Title: Gains -Linear.
This sheet shows how two countries with different production possibilities can
trade with each other and can gain from trade. It calculates the percentage
increase in Y production that results from trade, given a fixed value of X. A’s
X and B’s X production level are both equal to 25 units respectively. B's
maximum X = 60 and B's maximum Y = 200.

9.

Choose different values for A's X. A's X now equals __________.

What happens to the percentage gain in Y if A’s X increases? Why?

What happens to the percentage gain in Y if A’s X decreases? Why?

10.

Choose different values for B's X. B's X is now __________.

What happens to the percentage gain in Y if B’s X increases? Why?

What happens to the percentage gain in Y if B’s X decreases? Why?

What happens to the percentage gain in Y if A’s X=50 and B’s X=0?
Why?

Sheet Title: Nonlinear PPCs.
This sheet shows the increase in total Y production (holding X constant) as a
result of trade between the two countries. A’s maximum X, maximum Y, and X
production are equal to 30, 90, and 30 respectively. B’s maximum X, maximum Y,
and X production are equal to 100, 400, and 70 respectively.

17.

What happens to the opportunity cost at the level of efficient
resource assignment? Why?

18.

Change B’s production of X to 100. What happens to the opportunity
cost at the level of efficient resource assignment? Why?